David Friedberg Explains Why AI Will Break Every Economic Model: Will Output Surpass Consumptive Capacity? I think fundamentally, if you're driving productivity with AI, you're driving leverage on human time and leverage on capital. The question is, how quickly can you drive that up? And that's a function of... how much consumption there is, how much capacity there is for consumption. So if your earnings are the same, but things are getting more expensive, you're not happy. If your earnings go up by 10% and things stay the same price, you got 10% more than you had last year, you're gonna be happy. I just think all humans are driven by this need to consume more each year than they did last year. So I think for me, that's the lower limit on consumptive capacity in the world. The question that we're now facing, which we've never faced in human history before, is there an upper limit on consumptive capacity? Because AI creates such a profound shift in productivity and in leverage that normally you would say, “Hey, when we get a new tool or we get new leverage in a system, we build a new technology, we can make more with less.” Therefore, everyone gets access to more things for the same price or the cost of things that they consume come down by a certain price. But there may be a situation now where the ability to make stuff exceeds the capacity to consume stuff, and that is something that I don't think we’ve faced before. And I think that's where a lot of the models start to break. Just general economic models, just general productivity models and general social models. And this goes to the point about, like, what is everyone going to do? In the same way that I think we've argued that maybe SaaS was a transitory business phenomenon that existed between the foundation of the internet and the era of AI, it may be the case that knowledge work in general is also a transitory phenomenon that only existed between the foundation of the computer, or computing tools, and the existence of AI, generally speaking. And if all of that goes away very quickly, and all of those people can be redistributed and recast into doing other higher level, more creative things, their productivity goes up by 100x, is there really a consumer on the other end of all of that productivity? Is there really enough consumptive capacity? And I think that's the profound question that we all face.show more

The real risk isn’t overproduction. It’s meaning collapse. If humans are no longer economically necessary, the social contract fractures. That’s not an economic model break. That’s a civilizational one.

Interesting take @friedberg I’ll have to think about this one more

Can anyone even see it and believe it? Output can be infinite. Attention can’t. So the real job becomes distribution and trust.

, question for you guys, at what point will AI consume us? In terms of relevance, skills, talent, meaning, purpose and the future of work, or lack thereof. Surely that has to be factored in? circa 8+ billion people, many will be left behind and will require financial rescuing. Which may drive up taxes as social welfare expenditure will explode. And then the existential question that will haunt us is thus: Do we choose AI or humans? One will be a liability to productivity and a barrier to progress and the other not. I know who the AI will choose. What say you guys?

This is the question at the heart of everything. When production capacity exceeds consumption capacity, the entire economic model we’ve built around scarcity stops working. Prices fall, margins compress, and the relationship between labor and income breaks down. But here’s the piece I think gets overlooked: consumption isn’t fixed. When costs collapse, new categories of consumption emerge that weren’t possible before. Nobody “needed” a smartphone in 2005. Nobody “needed” streaming in 2010. When things become cheap enough, demand we couldn’t imagine materializes. The real tension isn’t whether there’s enough to consume. It’s the transition period. The gap between “knowledge work disappears” and “new forms of value emerge” could be a decade of disruption that existing economic and social models aren’t equipped to handle. Friedberg is asking the right question. The answer probably isn’t that consumption hits a ceiling. It’s that the path from here to there is messier, slower, and more painful than the productivity gains suggest. That’s the part we need to design for.

More time for family. One person working. As a retired person I am busier, more informed, a deeper thinker and healthier than my working years. As that lifestyle digs deeper into society the whole thing hinges on income. Wages must go up while inflation withers.

Friedberg just working out here, what us normals, not consumed by the AI race, with no skin in the game, knew instinctively, that we are about to get royally fucked over. Whichever way you chop it, bcos first it takes our jobs, then the economy collapses as the demand isnt there.

I think a lot of this is pump and dump talk. They have to make you feel the gains will be enormous to justify the investment they are making. I like David but I’m sure he is heavily invested to data centers, etc. The rubber band will snap

This is what I was saying the other day:

“If the machines can do all this farming for us, what will all the farmers do?” might have been a profound question in 1850, but it’s not now.

Excellent insight 👌

Deflation basically

yea, this only works if the productivity is shared. So when you fire 40% of your work force, the productivity isn't shared, it is consolidated. The rich are going to get a lot richer... and well that means the poor, you what...

production outpacing consumption isn’t new. we already have more content, more food, more software than anyone can use. the economy didn’t break, it just moved the bottleneck from making things to choosing things. AI accelerates the same pattern.

Why pay a business to do something that you can do at home if you have the right tools, raw material and knowledge? Many people will be extreme DIY'ers. Moreover, when human robots are distributed throughout the population and the robot can do it for the owner, raw materials and tools will be the constraints. Want a pool, your robot can do that for you. Got a roof leak, the robot will fix it, want AC in your garage, tell the robot to Insulate the attic and walls and install a mini split. Want the laundry done, tell the robot. Need the lawn mowed, tell the robot. Your robot is broken, tell the other robot to fix it. I believe AI will fundamentally change how people live their lives, socialize and spend their time. I just hope it is a civilized, productive, and happy society that results from it. I am currently not convinced that will be the outcome. Humans thrive when they experience stress. For some more than others, for others it's less. With no stress on humans I fear society will degrade and implode on itself. Humans were wired to compete in so many different ways. For a healthy civilization competition will be needed. The big question is, what does that look like and how do you provide it to the population in a meaningful way?

The consumptive capacity of humans is limitless

China already leading the way. Immense capital destruction

Im not convinced of his assumption that humans are driven by plus 10%

Look at what the Epstein files reveal about some of these so-called elites, human desire can be limitless. That endless craving is where human suffering begins. So the answer is No.

output already surpassed my consumptive capacity 3 months ago. I generate more code than I can review. bottleneck moved from production to judgment

One example where this is happening is porn. Creating and distributing is accessible to anyone with an iPhone, so clearly there is more porn made than is being consumed, yet people still make it. In an oversaturated market where supply exceeds demand, the supply does not disappear; it just takes the top X% of demand.

One of the best episodes in a while, the boys are back!

We must find a way to tap the consumptive capacity of the under-developed, world. There is a lot of consumption that must take place to bring all regions of the world to a more even footing. If we can produce things for less, we should look to consumers that can pay less.

That & Otimi’s

Consumption will be redefined. The need to consume changes once you have access to the ability to purchase whatever you want. Consumption due to boredom gets old. Those that have lived without or go through major events find consumption of stuff burdensome.

Until there is an oversupply of energy - agriculture/food - medicine/medical care, actual affordable housing : 92% of the world will not care what you’re talking about 😶😶😶😶😶😶😶😶😶😶😶

Friedberg is unknowingly echoing Marx’s overproduction crisis theory—capitalism implodes from too much stuff, too little purchasing power. Yet here we are, 150+ years later, society did not collapse, we thrived . History rhymes, but doesn’t always repeat

Friedberg nailed it. AI is about to unleash production that dwarfs humanity’s consumptive capacity. Without some form of UBI to keep demand alive, the entire economic model breaks. This isn’t scarcity anymore; it’s abundance we’re not structured to handle. Time to rethink the social contract.

No. Along the way 2 what DF describes, we'll have the usual constraints (not just re:energy). Expect bottlenecks, delays along critical paths, variability/shocks, bad actors, high taxes, ... The world will prioritize some BIG needs (e.g., health/human capital for 8B) over others.

The real question is whether distribution adapts fast enough.

@friedberg there’s only so much each of us can (should) eat, sleep, etc. AI-led output will not surpass our consumptive capacity: it’ll get way cheaper, plus this: b/c so much of consumption is about luxury goods & status signaling, that is where consumption will head. + health

What I keep coming back to is what "consumptive capacity" actually means as AI compresses the cost of most tradeable goods and services. If output grows fastest in the things AI can produce cheaply, demand might just shift toward what AI can't scale: time, experience, status, physical presence. The question of whether output surpasses consumption starts to look like a question about what people actually want

"There may be a situation now where the ability to make stuff exceeds the capacity to consume stuff". Sure, and in a free market that would impact price but we don't operate in a free market where supply and demand set price. We haven't for over 50 years. If the ability to make stuff exceeds the capacity to consume stuff, rest assured that central banks will mop up that excess in the form of increased circulation of USD to the benefit of the debtors around the world and to the detriment of anyone not similarly leveraged or holding assets.

AI could push production beyond what humans can consume. If output grows faster than demand, economic models break. The real constraint may become consumption, not productivity.